Oil slides due to Gulf diplomatic crisis

BAGHDAD: As diplomatic clash emerges between OPEC member, specifically between Saudi Arabia and Qatar, earlier gains of oil has erased out. Futures slipped 0.6% in New York, erasing an earlier gain of 1.6%. Saudi Arabia, Bahrain, the United Arab Emirates and Egypt said they will suspend air and sea travel to and from Qatar, escalating a crisis that started over its relationship with Iran.

While the diplomatic spat hasn’t affected shipments, any further escalation could raise the prospect of supply disruptions from the Middle East, including Organization of the Petroleum Exporting Countries members Saudi Arabia, Iran and Qatar.

The nations all use the Strait of Hormuz, through which the US Department of Energy estimates about 30% of seaborne oil trade passes. Crude had fallen in three of the previous four sessions amid concern that an extension of Opec’s cuts won’t be enough to shrink global inventories as US output expands.

Tamas Varga, an analyst at PVM Oil Associates Ltd in London, said, “Given the persisting bearish sentiment in the oil market, the unprecedented move might not have a long-lasting impact on oil prices, but it is worth keeping in mind.”

West Texas Intermediate for July delivery slipped 43 cents to US$47.23 a barrel on the New York Mercantile Exchange at 1:48 pm in London. Total volume traded was about 50% above the 100-day average. Prices lost 70 cents to close at US$47.66 on Friday, capping a 4.3% decline for the week.

Brent for August settlement fell 49 cents to US$49.46 a barrel on the London-based ICE Futures Europe exchange. Prices fell 4.2% percent last week. The global benchmark crude traded at a premium of US$2.04 to August WTI.